Wednesday, April 1, 2015

The Five Crucibles and How Netflix is Shaping the Streaming Industry

The Five Crucibles have enlightened me to reasons why companies may have taken specific actions. My main focus of this illustration is Netflix. Due to the mass adoption of the internet and the growing speeds and adoption of the Internet, Netflix has been able to step in and disrupt the century old motion picture industry.

Crucible 1: The Great Rebalancing
A huge shift of over 70 million people around the world are moving from poverty to the middle class every year! This opens new emerging international markets that Netflix has been aggressively expanding into. I found they are already expanded into the European market and is aiming for Latin America and Asia markets now. As the expansion of the internet proceeds...thanks to Google...Netflix is preparing itself to capture the emerging markets.

Crucible 2: The Productivity Imperative
Hire "more talent". But new talent just can't come quick enough. Based on two very important principles, I've found that Netflix has reshaped this thinking of needing "more talent" to needing "better talent". The two principles are:

"The best thing you can do for employees...is hire only 'A' players to work alongside them..."

"If we wanted only 'A' players on our team, we had to be willing to let go of people whose skills no longer fit..."

With these two principles in mind, Netflix has been able to shape a workforce that is much smaller but far more productive than a much larger workforce. This has also created a competitive culture and enjoyable working environment.

Crucible 3: The Global Grid
People are online all the time. What better way to capture this market than offering a service that let's people watch whatever show they want wherever they want? Along with mobile advancements, "Big Data" is a word that has recently become very popular, and although it provides significant insights for companies, many are finding it difficult to adopt big data methodologies. Netflix is able to leverage the information it's receiving on it's streaming site to deliver content targeted to specific users.

Crucible 4: Pricing the Planet
Environmental sustainability has become a global concern, in fact it's predicted that an "Upward of $2 trillion will probably be invested in building clean-energy capacity globally over the next ten years." I thought Netflix separating it's DVD's and streaming was a really idiotic move. But I later found out that the goal was to reduce it's carbon foot print. By separating the two businesses, they could move people away from their DVD business toward their streaming business which cost 78% less energy.

Crucible 5: The Market Share
The government is becoming more critical for mitigation as global impacts are more abrupt and severe. And "as companies expand globally, they will need to become more sophisticated about navigating an increasingly complex regulatory landscape." Netflix is currently working with local governments to encourage building their own local networks.

Through various articles Netflix is seen as the forefront of the video entertainment streaming industry and working through the Five Crucibles and aligning them with Netflix has shed some light on how Netflix is staying ahead of the competition.

Sources and Additional Readings:

What Happens Next? Five Crucibles of Innovation That Will Shape The Coming
Decade (Bisson et al., McKinsey Special Report, 2010)

Marketing and Structure of the Motion Picture Industry:
http://www.hbs.edu/faculty/Publication%20Files/05-059.pdf
http://variety.com/2014/voices/news/studios-wont-let-netflix-become-a-monopoly-1201032555/